Money and Happiness

Research tells us one thing. We seek professional advice from financial advisers and accountants when wanting to increase the amount of money in our bank account or find ways to increase what we earn, but we do not seek advice when looking at how we spend our money. Why? What is our relationship like with our bank balance? How does this relate to our happiness?

Let’s consider the Christmas advertisements that engulf our TV’s, Facebook ad’s and twitter feeds. Companies wanting us to dig into our purses and buy a product. If you bought something this week, did the purchase increase your overall happiness?

Now consider an ‘experience’ you have had recently. Perhaps a trip to the cinema with the children, or a recent concert you have attended. How did you feel after this experience? Does this alter to the product you purchased?

Which made you happier?

Psychology professor Elizabeth Dunn carried out a field experiment to test whether buying time causes greater happiness. 60 adults were randomly assigned to spend £30 on a time-saving purchase on one weekend and £30 on a material purchase on another weekend. The results showed that people felt happier when they spent money on a time saving purchase rather than on a material purchase.

We also have more fun telling the story of an experience than we do with a purchase of an item.

Experiences with money

Reminiscing about our experiences also provides nostalgia. As a nation we just love to reminisce about places we have been. This reassures us about our past happiness and accomplishments.

Buying an item also leads to buyers remorse. Urghh, that feeling when you look back at your purchasing decision and think, I wish I had not bought that Apple iPhone because now the new one has been launched and it looks so much better than the one I currently own. So we end up in a cycle of buyers remorse. Companies are very clever at playing on this!

What is the biggest regret that people have when they look back on their lives? Not doing something that they had the opportunity to do. Not buying the experience. The opposite is true of material purchases. Most people regret these purchases. Buying something they wish they had not.

When you next buy something – think about how this will make you feel. Will it better your life? Does it align to your money values?

What are your money values?

What are your money values is a great place to start. Often in my money coaching sessions, when we start to explore their money values they often find that in fact they are focusing on how to build their money rather than looking at what they are spending their money on.

Budgeting

How do the things you spend your money on align with your values and future plans?

It is easy to get stuck in a habit because you are not focused on what comes out of your bank accounts but more about bettering your careers and your income.

Analysing your spending

There are many advantages of analysing your spending:

It can provide a useful insight into how you spend and help you improve your money habits by analysing how important those purchases actually are.

Often you can tidy up some of the direct debits for memberships that you are no longer using.

It can enable you to create saving plans for known plans and big expenses each year such as Car MOT’s and Christmas. Try opening separate accounts for these things.

It can help you to identify ways to save money. Trim a little off the Utility bills by visiting www.comparethemarket.com.

So where should you start?

Look at where you spend your money.

Go back over the last 6 months, list out your direct debits and your purchases under headings such as “Food Shopping” and “Kids activities.”

Are you spending what you thought? Could you save a few pounds off some of these areas? Have you shopped around for your electricity and gas recently? Martin Lewis harps on about this a lot….for a very good reason! In fact if you google “cheapest gas and electric” Martin Lewis’ names comes up! Here us his recent update for you:

Another way to review your spending, is to consider switching your banking to an Online banking platform who can help you. I recently moved by banking to an Online bank called ‘Starling Bank.’ It offers lots of handy features and tools to put you back in control of your money.

What does it do:

Helps you analyse your spending habits through ‘spending insights’ that are categorised.

Allows you to create financial goals and targets

Start building a digital change jar

Pulse alerts show you what you are spending each day

-You can add your own image to your goals if you enjoy a visual goal

They also pay a nifty 0.50% gross on balances up to £2000.

Fee free spending and withdrawals when travelling abroad – this could save you a fortune if you are a regular traveller

It is regulated by the Financial Conduct Authority so has the full £85,000 savings protection.

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I am always honest in my opinions and will only recommend products or services that I have either used myself, or that I believe could be of benefit to readers.
The Money Panel is not regulated by The Financial Conduct Authority (FCA).